Photograph by: NICK PROCAYLO, PNG

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VANCOUVER — Businesses looking to relocate or expand are scrambling to secure industrial space in the Fraser Valley as leasing and sales activity heats up following a space shortage in 2014.

Leasing and sales in the first half of 2015 in the Fraser Valley, and particularly in Surrey and Langley, has been strong, according to a report published this month by Avison Young.

In the first half of 2015, 87 deals valued at more than $165 million took place. That’s compared to 156 transactions valued at $193.3 million for all of 2014, according to the Fraser Valley Industrial Report, which highlighted 2014 as having the lowest annual deal and dollar volume for industrial space in the region since 2005.

Roughly 1.5 million square feet of new space is expected to come online over the next year in the valley, easing the shortage, according to the report. However, a lack of overall space and developable land is making some companies reconsider the Lower Mainland as their home base.

The competition for space and lack of suitable land in recent years nearly left I-XL Masonry Supplies of Surrey without a home.

It became clear that the 103-year-old brick and stone supply company had outgrown its Newton head office, said president Karen Morrison in an interview. With administration and management housed separately from their warehouse and showroom, they started to search for a piece of land in the region.

“We wanted to move everyone together in one building and build a new building that was more up to date,” she said. “It never occurred to me in a million years that it would be this difficult.”

Nobody wanted to sell them land, she said. “It was ‘nope, we’ll do a build to suit’, so we totally gave up on ever getting any land.”

They eventually struck a lease agreement to move into a building in Cloverdale, but it’s not built yet.

“We wanted to move in by the end of 2014 and here we are in 2015 not looking at having a home until 2016, and it’s still not a slam dunk. The building is not going up yet,” Morrison said.

“We’ll be a tenant. This was the best that we could. I’m very surprised,” she said. “The only pieces of land that we could find that were available were much too large or much too small, or they had all kinds of conditions.”

Morrison said they’re lucky to have an accommodating landlord who has been willing to extend their lease in six-month blocks as they searched for a new home. “We could have been homeless because we gave them notice that we’d be moving never thinking that this could happen,” she said.

Last year represented a year of construction and a brief pause from what had been a very active leasing and sales period from 2011 to 2013, said Garth White, a principal at Avison Young in Vancouver.

“The market is fundamentally different this year,” he said in an interview. “I would expect that the dollar volume would surpass 2014 values significantly.”

Most of the action so far this year has been in Surrey, which saw 57 deals worth $70.3 million, and in Langley (10 deals at $77.9 million.) The first half of 2015 has seen a lot of businesses scrambling to get into new and existing spaces, with industrial vacancy in Surrey at around 3 per cent and in Langley at 4 per cent.

“It’s pretty tight,” White said. “We’re seeing multiple offers for very significant assets, which is rare for the Fraser Valley. The vacancy rates have come down significantly, which tilts the bidding war toward the landlords in terms of not having viable options for larger requirements, but that will change fairly soon as supply comes to the market.”

He said the market is seeing increased activity by Canadian export-related businesses and by businesses that are getting priced out of “core markets” like Vancouver, Burnaby and the Tri-Cities.

“We’re also seeing a lot of new entrants by major U.S. businesses trying to take advantage of the lower Canadian dollar,” White said, noting that ecommerce and logistics companies are also actively leasing.

A shortage of land supply is also playing a role in the market, White said. “A lot of investors are going out and buying pieces of dirt and that’s driving up pricing to new levels.”

Many stakeholders believe that “by 2020 or 2025, we’ll hit the wall in terms of running out of developable land,” he said.

“In the next five years, you’ll start to see a significant uptick in businesses looking to relocate out to Abbotsford and Chilliwack,” he said. “But at this point, businesses just perceive that those places are too far out.”

Morrison said the idea to relocate their headquarters away from B.C. occurred to her. “We had a lot more space in Calgary and we could have gone there. But I live in B.C. I don’t want to move and I don’t think all our other staff wanted to move either.”

Karen Morrison, president of I-XL Masonry Supplies in action in Surrey.

Photograph by: NICK PROCAYLO, PNG

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